Print

Email story

Comment

Letter to the editor

Politics

Rebates would strain IRS amid tax season

But Treasury says it is already preparing.

WASHINGTON - Most taxpayers could expect a rebate of up to $600 starting in mid May under the economic aid plan set to go through Congress within weeks.

Couples could get twice as much, with even more for most families with children. All that, however, depends on smooth sailing at the Internal Revenue Service, and the agency already is up to its eyeballs in filings and refunds.

The Treasury Department says that despite the strains of tax filing season, the IRS will be able to begin delivering the payments within 60 days after President Bush signs the plan into law, and complete the process in approximately 10 weeks, possibly sooner. The payments would come separately from regular tax refunds.

"The IRS has already begun trying to prepare for this," said Andrew DeSouza, a Treasury spokesman. "They'll be ready to go."

But figuring out if you qualify - and for how much - can be complicated, thanks to confusing rules designed to get the money to middle-income workers and ensure it also benefits low-income people who are most likely to spend the cash.

"Almost everyone who earns income will receive some benefit," said Douglas W. Elmendorf, an analyst at the Brookings Institution, a Washington think tank. "The idea is to target the money on the people who will spend a large share of it, and to target it on people who are likely to be hurt by an economic downturn."

The plan would allow people who do not qualify for a rebate this year to get one in the spring of 2009 if they become eligible based on their income level or tax liability in 2008.

About 40-million people who file their tax returns online could start getting payments by direct deposit in May. Congressional tax analysts say the government can send out up to 9-million paper checks a week. The IRS will have to reprogram its computers to calculate who gets the rebate and how much they will receive.

"They sort of learned how to do this last time," said Jason Furman, a Brookings economist, referring to the last round of rebates in 2001.

Still, the agency is already working overtime processing tax returns, and rebates will have to take a back seat come April, when the IRS will be overwhelmed in the runup to Tax Day.

"The two final weeks of tax filing season are very, very high-traffic weeks for the IRS," DeSouza said. "We'll just have to see what capacity they can handle."

[Last modified January 27, 2008, 02:34:16]